“You may qualify for government programs that can reduce your credit card debt by up to 70%.”
Does that sound familiar? I know that I see and hear advertisements like that all the time on the radio and internet. So who are these people and what are the “programs” they are talking about?
The “program” is not a program. It’s called a consumer proposal. A consumer proposal is a legal proceeding under The Bankruptcy and Insolvency Act. It is designed to give you legal protection from your creditors and a fresh start from your debts, while avoiding the implications of personal bankruptcy.
For many people consumer proposals are the best way to deal with their debts. Bankruptcy might mean losing your house or other assets. You get to keep all of your assets if you file a consumer proposal. Most times, a consumer proposal is a simple monthly payment that fits in your budget. That’s it.
Sounds good, right?
The catch is that only a trustee in bankruptcy is licensed to administer a consumer proposal. Many of the advertisements that you see and hear are not from trustees, they are from “debt consultants.” A debt consultant is an unlicensed, unregulated person who offers you advice for a price. You can call yourself a “debt consultant” and start advertising today if you wanted.
So yes, a consumer proposal does give you protection from your creditors. The phone calls and wage garnishments stop. But, is that a service that a debt consultant can provide?
A common scenario is that a consultant will charged you a fee of several hundred (or several thousand)dollars for a consultation and then refer you to a trustee to file a consumer proposal. Last week, Doug Hoyes provided a summary of some of the debt consultant horror stories that we have been hearing. There is no need to pay that fee. You can contact a trustee for a free consultation to review all of your options for dealing with your debts.
Here’s a clip of Doug Hoyes and Ted Michalos discussing debt consultants recently on 570 NEWS in Waterloo Region:
The reality is that some people will take advantage of you if you are not careful. If you are talking to somebody about the services they can provide, ask them lots of questions about who they are and where they get their authority from.
A trustee’s role is to provide unbiased information on all of your options to deal with your debts. Maybe that means a consumer proposal, maybe it means something else. A trustee’s role isn’t to convince you one way or another. It is to provide you with the information so that you can make the best decision for you and your family.